Budgetary Implications of the Savings and Loan Crisis

Gao ID: T-AFMD-88-19 October 5, 1988

GAO discussed the budgetary impact of the: (1) savings and loan industry crisis; and (2) Federal Savings and Loan Insurance Corporation's (FSLIC) use of notes payable and other commitments to resolve its case load of insolvent thrift institutions. GAO found that, in 1988: (1) thrift industry experienced an overall net loss totalling $7.5 billion; (2) insolvent institutions incurred losses of about $8.7 billion; (3) 497 institutions with $188 billion in assets reported negative net worth of about $26 billion; (4) FSLIC incurred $20.2 billion in costs relating to 126 actions it took to resolve the problems of failed institutions; and (5) FSLIC issued $10 billion in notes, although the Office of Management and Budget (OMB) had raised the budget estimates to only $5.8 billion in July 1988. GAO also found that the OMB fiscal year 1989 budget estimate for FSLIC was inadequate and could affect 1989 deficit reduction calculations.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Robert W. Gramling Team: General Accounting Office: Accounting and Financial Management Division Phone: (202) 275-9406


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